Sustainability Reporting CPD Presentation to ICAZ. Rodney Ndamba ACCA,MA (UK), ACSAP, CertIFR Executive Director

Transcription

1 CPD Presentation to ICAZ Rodney Ndamba ACCA,MA (UK), ACSAP, CertIFR Executive Director

2 Topics Section A: The context of sustainability reporting and environmental accounting Section B: The Role of Accountants and sustainability reporting Frameworks Section C: Overview of GRI and G3 Sustainability Reporting Framework Section D: Business Case for Sustainability Reporting Closing Remarks 10 June

3 Introduction But why should we be considering sustainability reporting in Zimbabwe now? How can we be practising Karate when the rest of the world is playing cricket 10 June

4 Section A: Context of Sustainability Reporting and Environmental Accounting Sustainability Reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organisational performance while working towards the goal of sustainable development - The Global Reporting Initiatives (GRI) Sustainable Development is defined as development that meet the need of the present without compromising the ability of future generation to meet their own needs - World Commission on Environment and Development (WCED) 10 June

5 1. Brief Dimension of Environmental Accounting and Disclosure in Zimbabwe Societal Expectation Model Companies Disclosure Percentage 1. Chairman s Statement 11 14% 2. Director Statement & C. Governance 24 30% 3. Accounting policy 7 9% 4. Financial Statements 4 5% 5. Notes to the Financial Statements 4 5% Source: Ndamba GRI Report Database 2010 Africa Reports - South Africa Nigeria 1 - Egypt 1 - Zimbabwe 0 10 June

6 Framework of Environmental Accounting Environmental Accounting Financial Environmental Accounting Environmental Management Accounting Financial Environmental Auditing 6 10 June 2011

7 1. Financial Environmental Accounting - Involves measuring, recording and reporting of financial information relating to environment using International Financial Reporting Standards, 2. Environmental Management Accounting - Involves environmental cost management, eco-budgeting, life cycle accounting, full cost accounting and strategic planning for environmental management. 3. Financial Environmental Auditing - Involves the assurance of financial information relating to environment using International Standards of Auditing 10 June

8 Financial Reporting Standards for environmental accounting - IAS 37, Provisions, Contingent liabilities and Assets- Provisions; - IAS 8, Accounting policies, changes in accounting estimates and errors; - IAS 16,Property, plant and equipment Capitalization of dismantling and environmental restoration costs in assets - IAS 18,Revenue Sales of waste material in disposal processes - IAS 36,Impairment of assets New technology that reduce environmental damage - IFRIC 1, Changes in existing decommissioning, restoration and similar liabilities; Highlights changes in measurement or estimates of existing costs; - IFRIC 5,Rights to interest arising from decommission, restoration and environmental rehabilitation funds; Where rehabilitation funds is set for contribution. Could be based on industrial sector. - IFRIC 6,Liabilities arising from participating in a specific market, waste electrical and electronic equipment; Disposal of waste EU Directive 10 June

9 Auditing and Assurance standards relating to Sustainability IAPS 1010 The Consideration of Environmental matters in the audit of financial statements; ISA 620 Using the work of an Auditor s expert; ISA 250 Consideration of laws and regulations in the audit of financial statements; ISA 540- Auditing accounting estimates ISAE3000 Assurance Engagements other than audits ISAE3410 Assurance Engagement on Greenhouse Gas statements 10 June

10 Brief Discussion So where do we stand as the accounting profession in Zimbabwe? Do we have a role in this? 10 June

11 Section B: The Role of Accountants & Sustainability Reporting Modify and develop current accounting systems to include sustainability issues on reporting to management; To include the sustainability agenda in financial planning, i.e. Green or Eco-Budgeting and capital investment appraisal, To introduce sustainability issues in our performance measures in external reporting (Annual reports) 10 June

12 Drivers of Sustainability Reporting Corporate Governance codes King III (S.Africa) Stock Markets JSE(SRI), Dow Jones (DJSI), LSE (FT4Good), Singapore Stock Market Investors and stakeholders UN Global Compact, UNEPFI & Markets, WBCSD Legislations and policies Companies Acts (SA, Mauritius) 10 June

13 Stock Markets Sustainability Reporting Increasingly global companies understand that a commitment to sustainability reporting can contribute to financial success. Such transparency allows companies to reach a broader range of investors and customers, enhance operational efficiency, improve brand positioning, and develop leadership in the marketplace. Social Investment Research Analysts Network (SIRAN) and Social Investments Network (SIN) (2008) The vision for sustainability reporting has never been more urgent for firms that seek to create value while transforming their sustainability impacts - James Farrar, Vice President Sustainability, SAP (2010) 10 June

14 Key Features of Sustainability Indexes: - SRI Meant to serve as a vehicle for responsible investments for investors looking for non financial risk. Also meant to promote the development of responsible business practices. Criteria: Environment, Social and Governance (ESG) - DJSI Was established to track the performance of companies that lead the field in terms of corporate sustainability. Criteria: Environment, Social and Economic (ESG) - FTSE4Good Was designed to act as a tool for investors who are interested in evaluating and investing in companies with good track records of corporate sustainability. Criteria: Environmental Management, Climatic change mitigation and adaptation, Countering bribe, Upholding Human rights and Labour rights, 10 June

15 Sustainability Reporting Frameworks Global Reporting Initiative (GRI) IFAC Sustainability Framework Integrated Reporting June 2011

16 Features in Sustainability Reporting Frameworks Global Reporting Initiative (GRI) s 3G Economic, Environment, Social, Labour practice, Human rights, Society & Product responsibility IFAC Sustainability Framework Economic viability, Social responsibility & environmental responsibility Role of accountants Integrated or Connected Reporting System (Prince Charles Project) Business strategy and sustainability, Key Performance Indicators (KPI) and action taken, The connected Performance report AA1000 AccountAbility Principles Inclusivity, Materiality and Responsiveness towards an organization's performance 10 June

17 Who is the Global Reporting Initiatives (GRI) The Global Reporting Initiative (GRI) is a network-based organization that pioneered the world s most widely used sustainability reporting framework. GRI is committed to the Framework s continuousimprovement and application worldwide. GRI s core goals include the mainstreaming of disclosure on environmental, social and governance performance June 2011

18 What is GRI s core goal and function processes? GRI s core goals include the mainstreaming of disclosure on environmental, social and governance performance. How is the framework developed? GRI's Reporting Framework is developed through a consensus-seeking, multi-stakeholder process Participants aredrawn from global business, civil society, labour, academic and professional institutions June 2011

19 What is contained in the GRI Framework? The Reporting Framework sets out the Principles, Profile Disclosure, Disclosure on Management Approach (DMA) and PerformanceIndicators that organizations can use to measure and report their economic, environmental, and social performance. What is covered in a GRI Framework G3 Economic, Environment, Social, Labor practice, Human rights, Labour Practice, Descent work, Society & Product responsibility Updated G3.1 Include Gender, Human Rights, Communities June 2011

20 Brief Discussions Example of complete GRI Report Implats Novo Tongaat GRI Indicators June 2011

21 Steps in Preparing a GRI Report 1. Prepare This step is aims to promote internal discussion at management level to identify positive and negative economic, environmental and social impact 2. Connect This part seeks stakeholder input of material issues to be included in the final report 3. Define This part confirms stakeholder input and management aspects are really material 4. Monitor This part is the gathering of data that goes in the final report 5. Communicate This part involve preparation and writing of final report June 2011

22 GRI Report Application Levels: Level C, C+ Report on 10 indicators Level B, B+ - Report fully on a minimum of 20 indicators Level A, A+ -Report on each core indicator and sector supplement Levels denoted + must have been independently checked or audited. A GRI is granted once report is accepted June 2011

23 Section D:Business Case for Preparing Sustainability Reports (a) Help Develop vision and strategy (b) Improve management system, improve internal processes and set goals (c) Indentifies weakness and strengths (d) Attract and retain employees (e) Connect department and encourages innovation (f) Raises awareness with the Board (g) Achieve competitive advantage and leadership (h) Attract investors (i) Enhance reputation, achieve trust and respect (j) Demonstrate commitment to sustainability June 2011

24 Closing Remarks Businesses need to balance today s profits with tomorrow's sustainability We need to consider the history we are leaving for the next generation as Transient Caretakers on planet Earth Thank you! 10 June